Henderson is the Corbett Administration's Chief of Staff and Energy Executive

StateImpactNPR.org

Patrick Henderson, Pennsylvania’s Gov. Tom Corbett (R-PA) Deputy Chief of Staff and Energy Executive went on record yesterday to explain and defend several of the Corbett’s Administration’s high profile and controversial energy policies and initiatives. In an exclusive interview with Examiner.com, Mr. Henderson stated that when it comes to Pennsylvania’s Impact Fee it is neither accurate nor fair to compare drilling tax rates from one oil and gas producing state to another. “It is the totality of a given state’s business tax environment which must be considered when it comes to the oil and gas industry. While it’s true several states tax oil and gas production at rates not seen in Pennsylvania, we however levy a 9.9% corporate income tax which includes drillers along with 3.07% personal income tax. The state of Texas by contrast has no corporate income taxes or personal income taxes.” he said.

Henderson further stated, “The Governor is committed to the long term growth and job creation from Pennsylvania’s portion of the Marcellus shale formation and we are mindful of the state’s total tax environment, not just one subset of taxes.” stated Henderson.

The Governor’s Deputy Chief of Staff and Energy Executive went on to explain several, in what he views, as under reported aspects of the state’s current Impact Fee on oil and gas drillers. Henderson stated “The state’s Impact Fee is levied on each shale oil and gas well from the moment drilling begins. It’s accessed on all wells in the state either producing or not producing and covers more than 8,000 instate wells. We do allow drillers to be exempt from the Impact Fee if after the first three years, a given well is not producing from its start or no longer producing and is shut in.” He went on to state, “The Impact Fee covers a fifteen year period and is tied to the market price of natural gas which has been going up over the last year.” The initial Impact Fee rate is up to $50,000 on each newly drilled well and gradually declines over the fifteen year time period of the Impact Fee’s existence. In total the state has raised more than $600 million in ongoing Impact Fees.

Henderson stated the Impact Fee was also designed to help support those Pennsylvania communities and local governments most impacted by drilling operations which stress fire, police, transportation and emergency service providers at the local municipal level. “We were always concerned a general production based tax on drillers would not insure needed funds would go to those Pennsylvania communities most heavily impacted by drillers based on where the natural gas is found in the Marcellus. The Impact Fee insures these communities receive financial support to continue to effectively provide necessary municipal services.” he said.

The Governor’s Deputy Chief of Staff expressed a strong degree of professional frustration over the charges by critics of the Governor he arbitrarily cut education funding while ignoring an opportunity to raise taxes on drillers. “The vast majority of Pennsylvania’s education funding cuts came about as the federal government under the Obama Administration cut funds for education to the states back in 2010 and 2011 as the Governor was coming into office. We immediately warned local municipal governments not to rely on or base their budgets from ongoing federal education financial support.” Henderson pointed out how Governor Corbett increased state education funding by $200 million with state funding in the face of rapidly disappearing federal education funding levels. He stated, “We are frustrated by the fact this action by the Governor was, in our view, under reported or not reported at all by a large number of the state’s reporting media.”

On the issue of Oklahoma based Chesapeake Energy, which many local Pennsylvania landowners have claimed the company unfairly reduces the landowners monthly drilling royalty fees, Henderson stated the Governor has been aggressive and clear in directly communicating to Chesapeake Energy’s CEO Doug Lawler the company needs to treat Pennsylvania landowners fairly. He further stated, “The Governor supports improved transparency and common sense accounting in how oil and gas companies base their royalty payments to landowners. He is not in opposition to improvements in reporting designed to better protect Pennsylvania landowners provided it’s fair to all parties.”

Regarding changing Pennsylvania’s law requiring oil and gas drillers to report their production and drilling wastes to monthly reporting instead of the now twice a year reporting structure, Henderson stated, “Again the Governor supports greater industry transparency and timely reporting. He would not be in opposition to supporting changes in industry reporting practices however this must come from the state’s legislators as the reporting issue is subject to legislative law not executive direction by the Governor’s office.” The issue of monthly reporting of shale oil and gas production and wastes has become an issue for several oil and gas states due to the rapid production declines in such shale formations as the Texas’ Barnett along with the Arkansas’ Fayetteville and Louisiana Haynesville formations. With these states relying heavily on tax revenues and job creation from the oil and gas industry, monthly reporting of production is typically used to estimate future state revenues.

Henderson concluded yesterday’s interview by stating, “A majority of Pennsylvanians have seen their energy bills decrease through either lower natural gas retail prices or lower electricity rates or both from the production of drillers operating in our Marcellus Shale formation. The average retail customer’s energy savings has been roughly $1,200.00 from the time period of 2008 to 2011.”

Full disclosure: The writer does not own any oil and gas drilling company stocks. He is not being paid to write by any environmental, anti-fracking or oil and gas industry entity nor is he a member of any political action committee or election entities.

Share this article

Bob Magyar has more than 30 years of business development in the water and power generation/electrical distribution systems industries. He has held senior management positions in GTE Sylvania, American Standard and provided consulting services to BP Solar and Shell Solar. Today he runs his own management consulting firm Navitus Solar LLC and works primarily in the greater southwest on solar and wind development. A believer that no one energy source is a complete answer to today's American economy, he writes on energy issues impacting the greater Philadelphia and Delaware Valley region.